Exhibit 10.7
STOCK PURCHASE WARRANT
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This Warrant is issued this 6th day of March, 1998, by MegaMarketing
Corporation, a Georgia corporation (the "Company"), to SIRROM INVESTMENTS, INC.
a Tennessee corporation (SIRROM INVESTMENTS, INC. and any subsequent assignee or
transferee hereof are hereinafter referred to collectively as "Holder" or
"Holders").
AGREEMENT:
1. Issuance of Warrant; Term.
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(a) For and in consideration of SIRROM INVESTMENTS, INC. making a loan
to the Company in an amount of Three Million and no/100ths Dollars
($3,000,000) pursuant to the terms of a secured promissory note of even
date herewith (the "Note") and related loan agreement of even date herewith
(the "Loan Agreement"), and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company
hereby grants to Holder the right to purchase 260,192 shares of the
Company's common stock (the "Common Stock"), which the Company represents
equals 4% of the capital stock of the Company on the date hereof,
calculated on a fully diluted basis ("Base Amount") including the Base
Amount, provided that in the event that the indebtedness evidenced by the
Note is outstanding on the following dates, the Base Amount shall be
increased to the corresponding number set forth below (the "Outstanding
Debt Rachets"):
Date Base Amount
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March 6, 2001 398,592 shares of Common
Stock, which the Company
represents equals 6% of the
capital stock of the Company
on the date hereof
calculated on a fully
diluted basis including the
Base Amount.
March 6, 2002 543,010 shares of Common
Stock, which the Company
represents equals 8% of the
capital stock of the Company
on the date hereof
calculated on a fully
diluted basis including the
Base Amount.
Date Base Amount
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March 6, 2003 693,846 shares of Common
Stock, which the Company
represents equals 10% of the
capital stock of the Company
on the date hereof calculated
on a fully diluted basis
including the Base Amount.
and further provided that the initial Base Amount shall be increased to the
corresponding number as set forth below based upon the Company's actual
EBITDA for 1998 as a percentage of the Company's budget for EBITDA for
1998:
Actual EBITDA as a Base Amount
Percentage of Budget
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75% to 100% 260,192 shares of Common
Stock, which the Company
represents equals 4% of the
capital stock of the Company
on the date hereof
calculated on a fully
diluted basis including the
Base Amount.
Below 75% but 470,025 shares of Common
greater than or Stock, which the Company
equal to 50% represents equals 7% of the
capital stock of the Company
on the date hereof
calculated on a fully
diluted basis including the
Base Amount.
Below 50% 693,846 shares of Common
Stock, which the Company
represents equals 10% of the
capital stock of the Company
on the date hereof calculated
on a fully diluted basis
including the Base Amount.
If the initial Base Amount is increased as set forth above, the Outstanding
Debt Rachets shall be adjusted to increase the adjusted initial Base Amount
by 2% for each year the Note remains outstanding beyond March 6, 2001 (by
way of illustration, if the initial Base Amount is adjusted to 7%
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because the Company's actual EBITDA for 1998 is 70% of the 1998 budgeted
amount, the Outstanding Debt Rachets for 2001, 2002, and 2003 shall be 9%,
11%, and 13%, respectively, of the total capital stock of the Company.
(b) For purposes of this Agreement, the term "EBITDA" shall mean net
income plus interest expense plus income taxes plus depreciation expenses
---- ---- ----
plus amortization expenses, all determined in accordance with generally
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accepted accounting principles.
(c) The shares of Common Stock issuable upon exercise of this Warrant
are hereinafter referred to as the "Shares." This Warrant shall be
exercisable at any time and from time to time from the date hereof until
May 31, 2003. For purposes of this Warrant the term "fully diluted basis"
shall be determined in accordance with generally accepted accounting
principles as of the date hereof.
2. Exercise Price. The exercise price (the "Exercise Price") per share
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for which all or any of the Shares may be purchased pursuant to the terms of
this Warrant shall be One Cent ($.01).
3. Exercise. This Warrant may be exercised by the Holder hereof (but
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only on the conditions hereinafter set forth) as to all or any increment or
increments of One Hundred (100) Shares (or the balance of the Shares if less
than such number), upon delivery of written notice of intent to exercise to the
Company at the following address: 0000 Xxxxxxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxx,
Xxxxxxx 00000, or such other address as the Company shall designate in a written
notice to the Holder hereof, together with this Warrant and payment to the
Company of the aggregate Exercise Price of the Shares so purchased. The
Exercise Price shall be payable, at the option of the Holder (pursuant to
documentation reasonably satisfactory to the Company), (i) by certified or bank
check, (ii) by the surrender of the Note or portion thereof having an
outstanding principal balance equal to the aggregate Exercise Price or (iii) by
the surrender of a portion of this Warrant having a fair market value equal to
the aggregate Exercise Price. Upon exercise of this Warrant as aforesaid, the
Company shall as promptly as practicable, and in any event within fifteen (15)
days thereafter, execute and deliver to the Holder of this Warrant (or instruct
its transfer agent to do so) a certificate or certificates for the total number
of whole Shares for which this Warrant is being exercised in such names and
denominations as are requested by such Holder. If this Warrant shall be
exercised with respect to less than all of the Shares, the Holder shall be
entitled to receive a new Warrant covering the number of Shares in respect of
which this Warrant shall not have been exercised, which new Warrant shall in all
other respects be identical to
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this Warrant. The Company covenants and agrees that it will pay when due any and
all state and federal issue taxes which may be payable in respect of the
issuance of this Warrant or the issuance of any Shares upon exercise of this
Warrant.
4. Covenants and Conditions. The above provisions are subject to the
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following:
(a) Neither this Warrant nor the Shares have been registered under the
Securities Act of 1933, as amended ("Securities Act") or any state
securities laws ("Blue Sky Laws"). This Warrant has been acquired for
investment purposes and not with a view to distribution or resale and may
not be pledged, hypothecated, sold, made subject to a security interest, or
otherwise transferred without (i) an effective registration statement for
such Warrant under the Securities Act and such applicable Blue Sky Laws, or
(ii) an opinion of counsel, which opinion and counsel shall be reasonably
satisfactory to the Company and its counsel, that registration is not
required under the Securities Act or under any applicable Blue Sky Laws
(the Company hereby acknowledges that Bass, Xxxxx & Xxxx is acceptable
counsel). Transfer of the shares issued upon the exercise of this Warrant
shall be restricted in the same manner and to the same extent as the
Warrant and the certificates representing such Shares shall bear
substantially the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE
TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER THE ACT OR SUCH
APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH
REGARD THERETO, OR (II) IN THE OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY, REGISTRATION UNDER SUCH SECURITIES ACTS OR SUCH APPLICABLE
STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED
TRANSFER.
The Holder hereof and the Company agree to execute such other documents and
instruments as counsel for the Company reasonably deems necessary to effect the
compliance of the issuance of this Warrant and any shares of Common Stock issued
upon exercise hereof with applicable federal and state securities laws.
(b) The Company covenants and agrees that all Shares which may be
issued upon exercise of this Warrant will, upon issuance and payment
therefor, be legally and validly issued and outstanding, fully paid and
nonassessable, free from all taxes, liens, charges and preemptive rights
imposed by the
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Company, if any, with respect thereto or to the issuance thereof. The
Company shall at all times reserve and keep available for issuance upon the
exercise of this Warrant such number of authorized but unissued shares of
Common Stock as will be sufficient to permit the exercise in full of this
Warrant.
(c) The Company covenants and agrees that it shall not sell or issue
any shares of the Company's capital stock at a price below the fair market
value of such shares, without the prior written consent of the Holder
hereof. In the event that the Company sells shares of the Company's capital
stock in violation of this Section 4(c) (exclusive of any stock options
permitted under Section 17 hereof), the number of shares issuable upon
exercise of this Warrant shall be equal to the product obtained by
multiplying the number of shares issuable pursuant to this Warrant prior to
such sale by the quotient obtained by dividing (i) the fair market value of
the shares issued in violation of this Section 4(c) by (ii) the price at
which such shares were sold.
5. Transfer of Warrant. Subject to the provisions of Section 4 hereof,
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this Warrant may not be transferred, in whole or in part, to any person or
business entity without the prior written consent of the Company provided that
the Holder may transfer this Warrant to any affiliate of Holder, to any lender
of the Holder or any affiliate of Holder or in connection with the sale of all
or substantially all of the assets and/or stock of Holder or any affiliate of
Holder, any such transfer to be accomplished by presentation of the Warrant to
the Company with written instructions for such transfer and other documentation
reasonably required by the Company in order to comply with applicable securities
laws. Upon such presentation for transfer, the Company shall promptly execute
and deliver a new Warrant or Warrants in the form hereof in the name of the
assignee or assignees and in the denominations specified in such instructions.
The Company shall pay all expenses incurred by it in connection with the
preparation, issuance and delivery of Warrants under this Section.
6. Warrant Holder Not Shareholder; Rights Offering; Preemptive Rights;
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Preference Rights. Except as otherwise provided herein, this Warrant does not
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confer upon the Holder, as such, any right whatsoever as a shareholder of the
Company. Notwithstanding the foregoing, if the Company should offer to all of
the Company's shareholders the right to purchase any stock of the Company (other
than options to purchase stock granted to employees of the Company or pursuant
to the Company's stock option plans) then all shares of Common Stock that are
subject to this Warrant shall be deemed to be outstanding and owned by the
Holder and the Holder shall be entitled to participate in such rights offering.
The Company shall not grant any preemptive
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rights with respect to any of its capital stock without the prior written
consent of the Holder (which consent shall not be unreasonably withheld,
conditioned or delayed). The Company shall not issue any securities which
entitle the holder thereof to obtain any preference over holders of Common Stock
upon the dissolution, liquidation, winding-up, sale, merger, or reorganization
of the Company without the prior written consent of the Holder (which consent
shall not be unreasonably withheld, conditioned or delayed), unless such rights
are also granted to Holder.
7. Observation Rights. The Holder of this Warrant shall (a) receive
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notice of and be entitled to attend or may send a representative to attend all
meetings of the Company's Board of Directors in a non-voting observation
capacity and (b) receive copies of all correspondence, notices, packages and
documents and other information provided to members of the Company's Board of
Directors (including actions taken or to be taken by the Board of Directors on
written consent) from the date hereof until such time as the indebtedness
evidenced by the Note has been paid in full. Holder acknowledges that the
relationship between it and the Company places Holder in a position to learn
confidential information, both written and oral, about the Company's business
operations, financial condition, assets and affairs. For purposes of this
agreement, all such information to be provided, together with any other
information regarding the Company that has already been provided to Holder or
its representative and employees, is hereinafter collectively referred to as the
"Sensitive Material." Holder acknowledges that it is aware, and that it will
advise its officers, directors, employees, advisors and other representatives
that federal and state securities laws prohibit any person who has received from
an issuer material, non-public information about the issuer and matters which
are the subject of this Agreement from purchasing or selling securities of such
issuer or from communicating such information to any other person under
circumstances in which it is reasonably foreseeable that such person is likely
to purchase or sell such securities. Neither the Company nor its affiliates nor
their representatives, agents, employees or other related persons will have any
liability to Holder, its employees, agents or representatives or any third
parties resulting from the use of the Sensitive Material by Holder which Holder
acknowledges to be the Company's property, to itself and agrees not to use,
reveal, transfer, copy or disclose such Sensitive Material, directly or
indirectly, to any other person for any purpose without the prior written
consent of Company. Holder agrees to execute any additional confidentiality
agreement reasonably required by the Company in connection with any Sensitive
Material.
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8. Adjustment Upon Changes in Stock.
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(a) If all or any portion of this Warrant shall be exercised
subsequent to any stock split, stock dividend, recapitalization,
combination of shares of the Company, or other similar event, occurring
after the date hereof, then the Holder exercising this Warrant shall
receive, for the aggregate price paid upon such exercise, the aggregate
number and class of shares which such Holder would have received if this
Warrant had been exercised immediately prior to such stock split, stock
dividend, recapitalization, combination of shares, or other similar event.
If any
adjustment under this Section 8(a) would create a fractional share of
Common Stock or a right to acquire a fractional share of Common Stock, such
fractional share shall be disregarded and the number of shares subject to
this Warrant shall be the next higher number of shares, rounding all
fractions upward. Whenever there shall be an adjustment pursuant to this
Section 8(a), the Company shall forthwith notify the Holder or Holders of
this Warrant of such adjustment, setting forth in reasonable detail the
event requiring the adjustment and the method by which such adjustment was
calculated. For purposes hereof, the granting of stock or options pursuant
to a merger, asset acquisition, option agreement or other transaction where
all of the shareholders of the Company do not participate shall not be
considered a stock split, stock dividend recapitalization, combination of
shares of the Company, or other similar event giving rise to an adjustment.
(b) If all or any portion of this Warrant shall be exercised
subsequent to any merger, consolidation, exchange of shares, separation,
reorganization or liquidation of the Company, or other similar event where
all of the shareholders of the Company participate, occurring after the
date hereof, as a result of which substantially all shares of Common Stock
shall be changed into the same or a different number of shares of the same
or another class or classes of securities of the Company or another entity,
then the Holder exercising this Warrant shall receive, for the aggregate
price paid upon such exercise, the aggregate number and class of shares
which such Holder would have received if this Warrant had been exercised
immediately prior to such merger, consolidation, exchange of shares,
separation, reorganization or liquidation, or other similar event. If any
adjustment under this Section 8(b) would create a fractional share of
Common Stock or a right to acquire a fractional share of Common Stock, such
fractional share shall be disregarded and the number of shares subject to
this Warrant shall be the next higher number of shares, rounding all
fractions upward. Whenever there shall be an
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adjustment pursuant to this Section 8(b), the Company shall forthwith
notify the Holder or Holders of this Warrant of such adjustment, setting
forth in reasonable detail the event requiring the adjustment and the
method by which such adjustment was calculated.
9. Put Agreement.
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(a) The Company hereby irrevocably grants and issues to Holder the
right and option to sell to the Company (the "Put") this Warrant (to the
extent not previously exercised) for a period of 30 days immediately prior
to the expiration thereof, at a purchase price (the "Purchase Price") equal
to the Fair Market Value (as hereinafter defined) of the shares of Common
Stock issuable to Holder upon exercise of this Warrant.
(b) The Company shall pay to the Holder, in cash or certified or
cashier's check, the Purchase Price in exchange for the delivery to the
Company of this Warrant within thirty (30) days of the receipt of written
notice, addressed as set forth in Section 3 hereto, from the Holder of its
intention to exercise the Put and all other documentation reasonably
required by the Company in connection therewith in order for the Company to
comply with applicable securities laws.
(c) The Fair Market Value of the shares of Common Stock of the Company
issuable pursuant to this Warrant shall be determined as follows:
(i) If after an initial public offering of the Common Stock,
the average of the closing bid and ask prices for the Common Stock (as
quoted on a national exchange) shall be the fair market value. If
prior to a public offering, the Company and the Holder shall each
appoint an independent, experienced appraiser who is a member of a
recognized professional association of business appraisers. The two
appraisers shall determine the value of the shares of Common Stock
which would be issued upon the exercise of the Warrant, taking into
consideration that such shares would constitute a minority interest,
and would lack liquidity, and further assuming that the sale would be
between a willing buyer and a willing seller, both of whom have full
knowledge of the financial and other affairs of the Company, and
neither of whom is under any compulsion to sell or to buy.
(ii) If the highest of the two appraisals is not more than 10%
more than the lowest of the appraisals, the Fair Market Value shall be
the average of the two
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appraisals. If the highest of the two appraisals is 10% or more than
the lowest of the two appraisals, then a third appraiser shall be
appointed by the two appraisers, and if they cannot agree on a third
appraiser, the American Arbitration Association shall appoint the
third appraiser. The third appraiser, regardless of who appoints him
or her, shall have the same qualifications as the first two
appraisers.
(iii) The Fair Market Value after the appointment of the third
appraiser shall be the mean of the three appraisals.
(iv) The fees and expenses of the appraisers shall be paid one-
half by the Company and one-half by the Holder.
10. Registration.
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(a) The Company and the holders of the Shares agree that if at any
time after the date hereof the Company shall propose to file a registration
statement with respect to any of its Common Stock on a form suitable for a
public offering (excluding any registrations pursuant to forms S-4 and S-8
or any successor forms thereof), it will give notice in writing to such
effect to the registered holder(s) of the Shares at least thirty (30) days
prior to such filing, and, at the written request of any such registered
holder, made within ten (10) days after the receipt of such notice, will
include therein at the Company's cost and expense (including the reasonable
fees and expenses of one counsel to such holder(s), but excluding
underwriting discounts, commissions and filing fees attributable to the
Shares included therein) such of the Shares as such holder(s) shall
request; provided, however, that if the offering being registered by the
Company is underwritten and if the representative of the underwriters
certifies in writing that the inclusion therein of the Shares would
materially and adversely affect the sale of the securities to be sold by
the Company thereunder, then the Company shall be required to include in
the offering only that number of securities, including the Shares, which
the underwriters determine in their sole discretion will not jeopardize the
success of the offering (the securities so included to be apportioned pro
rata among all selling shareholders according to the total amount of
securities entitled to be included therein owned by each selling
shareholder. The obligations of the Company under this Section 10 shall
terminate with respect to a Holder of Shares when such Shares become
eligible for resale in accordance with Rule 144 under the Securities Act of
1933 within a three month period without restrictions as to volume.
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(b) Whenever the Company undertakes to effect the registration of any
of the Shares, the Company shall, as expeditiously as reasonably possible:
(i) Prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement covering such
Shares and use its best efforts to cause such registration statement
to be declared effective by the Commission as expeditiously as
possible and to keep such registration effective until the earlier of
(A) the date when all Shares covered by the registration statement
have been sold or (B) two hundred seventy (270) days from the
effective date of the registration statement; provided, that before
filing a registration statement or prospectus or any amendment or
supplements thereto, the Company will furnish to each Holder of Shares
covered by such registration statement and the underwriters, if any,
copies of all such documents proposed to be filed (excluding exhibits,
unless any such person shall specifically request exhibits), which
documents will be subject to the review of such Holders and
underwriters, and the Company will not file such registration
statement or any amendment thereto or any prospectus or any supplement
thereto (including any documents incorporated by reference therein)
with the Commission if (A) the underwriters, if any, shall reasonably
object to such filing or (B) if information in such registration
statement or prospectus concerning a particular selling Holder has
changed and such Holder or the underwriters, if any, shall reasonably
object. If a Holder objects to the filing of the registration
statement (which objection must be delivered to the Company in
writing), the Company may remove such Holder's Shares from the
offering and proceed to file with no further obligation to such Holder
hereunder.
(ii) Prepare and file with the Commission such amendments and
post-effective amendments to such registration statement as may be
necessary to keep such registration statement effective during the
period referred to in Section 10(b)(i) and to comply with the
provisions of the Securities Act with respect to the disposition of
all securities covered by such registration statement, and cause the
prospectus to be supplemented by any required prospectus supplement,
and as so supplemented to be filed with the Commission pursuant to
Rule 424 under the Securities Act.
(iii) Furnish to the selling Holder(s) such numbers of copies of
such registration statement, each
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amendment thereto, the prospectus included in such registration
statement (including each preliminary prospectus), each supplement
thereto and such other documents as they may reasonably request in
order to facilitate the disposition of the Shares owned by them.
(iv) Use its best efforts to register and qualify under such
other securities laws of such jurisdictions as shall be reasonably
requested by any selling Holder and do any and all other acts and
things which may be reasonably necessary or advisable to enable such
selling Holder to consummate the disposition of the Shares owned by
such Holder, in such jurisdictions; provided, however, that the
Company shall not be required in connection therewith or as a
condition thereto to qualify to transact business or to file a general
consent to service of process in any such states or jurisdictions.
(v) Promptly notify each selling Holder of the happening of
any event as a result of which the prospectus included in such
registration statement contains an untrue statement of a material fact
or omits any fact necessary to make the statements therein not
misleading and, at the request of any such Holder, the Company will
prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Shares, such prospectus
will not contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not
misleading.
(vi) Provide a transfer agent and registrar for all such Shares
not later than the effective date of such registration statement.
(vii) Enter into such customary agreements (including
underwriting agreements in customary form for a primary offering) and
take all such other actions as the underwriters, if any, reasonably
request in order to expedite or facilitate the disposition of such
Shares (including, without limitation, effecting a stock split or a
combination of shares).
(viii) Make available for inspection by any selling Holder or
any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent
retained by any such selling Holder or underwriter, all financial and
other records, pertinent corporate documents and properties of the
Company, and cause the officers, directors, employees and independent
accountants of the
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Company to supply all information reasonably requested by any such
seller, underwriter, attorney, accountant or agent in connection with
such registration statement.
(ix) Promptly notify the selling Holder(s) and the
underwriters, if any, of the following events and (if requested by any
such person) confirm such notification in writing: (A) the filing of
the prospectus or any prospectus supplement and the registration
statement and any amendment or post-effective amendment thereto and,
with respect to the registration statement or any post-effective
amendment thereto, the declaration of the effectiveness of such
documents, (B) any requests by the Commission for amendments or
supplements to the registration statement or the prospectus or for
additional information, (C) the issuance or threat of issuance by the
Commission of any stop order suspending the effectiveness of the
registration statement or the initiation of any proceedings for that
purpose, and (D) the receipt by the Company of any notification with
respect to the suspension of the qualification of the Shares for sale
in any jurisdiction or the initiation or threat of initiation of any
proceeding for such purposes.
(x) Make every reasonable effort to prevent the entry of any
order suspending the effectiveness of the registration statement and
obtain at the earliest possible moment the withdrawal of any such
order, if entered.
(xi) Cooperate with the selling Holder(s) and the underwriters,
if any, to facilitate the timely preparation and delivery of
certificates representing the Shares to be sold and not bearing any
restrictive legends, and enable such Shares to be in such lots and
registered in such names as the underwriters may request at least two
(2) business days prior to any delivery of the Shares to the
underwriters.
(xii) Provide a CUSIP number for all the Shares not later than
the effective date of the registration statement.
(xiii) Prior to the effectiveness of the registration statement
and any post-effective amendment thereto and at each closing of an
underwritten offering, (A) make such representations and warranties to
the selling Holder(s) and the underwriters, if any, with respect to
the Shares and the registration statement as are customarily made by
issuers to selling
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Shareholders in primary underwritten offerings; (B) use its best
efforts to obtain "cold comfort" letters and updates thereof from the
Company's independent certified public accountants addressed to the
selling Holders and the underwriters, if any, such letters to be in
customary form and covering matters of the type customarily covered in
"cold comfort" letters by underwriters in connection with primary
underwritten offerings; (C) deliver such documents and certificates as
may be reasonably requested (1) by the holders of a majority of the
Shares being sold, and (2) by the underwriters, if any, to evidence
compliance with clause (A) above and with any customary conditions
contained in the underwriting agreement or other agreement entered
into by the Company; and (D) obtain opinions of counsel to the Company
and updates thereof (which counsel and which opinions shall be
reasonably satisfactory to the underwriters, if any), covering the
matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by the
selling Holders and underwriters or their counsel. Such counsel shall
also state that no facts have come to the attention of such counsel
which cause them to believe that such registration statement, the
prospectus contained therein, or any amendment or supplement thereto,
as of their respective effective or issue dates, contains any untrue
statement of any material fact or omits to state any material fact
necessary to make the statements therein not misleading (except that
no statement need be made with respect to any financial statements,
notes thereto or other financial data or other expertized material
contained therein). If for any reason the Company's counsel is unable
to give such opinion, the Company shall so notify the Holders of the
Shares and shall use its best efforts to remove expeditiously all
impediments to the rendering of such opinion.
(xiv) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders earnings statements satisfying the
provisions of Section 11(a) of the Securities Act, no later than
forty-five (45) days after the end of any twelve-month period (or
ninety (90) days, if such period is a fiscal year) (A) commencing at
the end of any fiscal quarter in which the Shares are sold to
underwriters in a firm or best efforts underwritten offering, or (B)
if not sold to underwriters in such an offering, beginning with the
first month of the first fiscal quarter of the Company commencing
after the effective date of the registration statement, which
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statements shall cover such twelve-month periods.
(c) After the date hereof, the Company shall not grant to any holder
of securities of the Company any registration rights which have a priority
greater than or equal to those granted to Holders pursuant to this Warrant
without the prior written consent of the Holder(s) which shall not be
unreasonably withheld or delayed.
(d) The Company's obligations under Section 10(a) above with respect
to each holder of Shares are expressly conditioned upon such holder's
furnishing to the Company in writing such information concerning such
holder and the terms of such holder's proposed offering as the Company
shall reasonably request for inclusion in the registration statement. If
any registration statement including any of the Shares is filed, then the
Company shall indemnify each holder thereof (and each underwriter for such
holder and each person, if any, who controls such underwriter within the
meaning of the Securities Act) from any loss, claim, damage or liability
arising out of, based upon or in any way relating to any untrue statement
of a material fact contained in such registration statement or any omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, except for any such
statement or omission based on information furnished in writing by such
holder of the Shares expressly for use in connection with such registration
statement; and such holder shall indemnify the Company (and each of its
officers and directors who has signed such registration statement, each
director, each person, if any, who controls the Company within the meaning
of the Securities Act, each underwriter for the Company and each person, if
any, who controls such underwriter within the meaning of the Securities
Act) and each other such holder against any loss, claim, damage or
liability arising from any such statement or omission which was made in
reliance upon information furnished in writing to the Company by such
holder of the Shares expressly for use in connection with such registration
statement.
(e) For purposes of this Section 10, all of the Shares shall be deemed
to be issued and outstanding.
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11. Certain Notices. In case at any time the Company shall propose to:
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(a) declare any cash dividend upon its Common Stock;
(b) declare any dividend upon its Common Stock payable in stock or
make any special dividend or other distribution to the holders of its
Common Stock;
(c) offer for subscription to the holders of any of its Common Stock
any additional shares of stock in any class or other rights;
(d) reorganize, or reclassify the capital stock of the Company, or
consolidate, merge or otherwise combine with, or sell all or substantially
all of its assets to, another corporation; or
(e) voluntarily or involuntarily dissolve, liquidate or wind up the
affairs of the Company;
then, in any one or more of said cases, the Company shall give to the
Holder of the Warrant, by certified or registered mail, (i) at least ten
(10) days' prior written notice of the date on which the books of the
Company shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to vote in
respect of any such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, and (ii) in the case
of such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, at least ten (10) days' prior
written notice of the date when the same shall take place. Any notice
required by clause (i) shall also specify, in the case of any such
dividend, distribution or subscription rights, the date on which the
holders of Common Stock shall be entitled thereto, and any notice required
by clause (ii) shall specify the date on which the holders of Common Stock
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, as the
case may be.
12. Rights of Co-Sale. Prior to the completion of a Qualified Public
-----------------
Offering (as hereinafter defined) the following shall apply:
(a) Co-Sale Right. Neither Xxxx X. Xxxxx, Xxxxxx X. Xxxxxxxxx, nor
-------------
Xxxx X. Xxxxx (individually a "Selling Shareholder" and collectively the
"Selling Shareholders") shall enter into any transaction that would result
in the
15
sale by him of any Common Stock now or hereafter owned by him, unless prior
to such sale the Selling Shareholder shall give notice to Holder of his
intention to effect such sale in order that Holder may exercise its rights
under this Section 12 as hereinafter described. Such notice shall set forth
(i) the number of shares to be sold by the Selling Shareholder, (ii) the
principal terms of the sale, including the price at which the shares are
intended to be sold, and (iii) an offer by the Selling Shareholder to use
his best efforts to cause to be included with the shares to be sold by him
in the sale, on a share-by-share basis and on the same terms and
conditions, the Shares issuable or issued to Holder pursuant this Warrant.
(b) Rejection of Co-Sale Offer. If Holder has not accepted such offer
--------------------------
in writing within a period of ten (10) days from the date of receipt of the
notice, then the Selling Shareholder shall thereafter be free for a period
of ninety (90) days to sell the number of shares specified in such notice,
at a price no greater than the price set forth in such notice and on
otherwise no more favorable terms to the Selling Shareholder than as set
forth in such notice, without any further obligation to Holder in
connection with such sale. In the event that the Selling Shareholder fails
to consummate such sale within such ninety-day period, the shares specified
in such notice shall continue to be subject to this Section.
(c) Acceptance of Co-Sale Offer. If Holder accepts such offer in
---------------------------
writing within ten (10) day period, such acceptance shall be irrevocable
unless the Selling Shareholder shall be unable to cause to be included in
his sale the number of Shares of stock held by Holder and set forth in the
written acceptance. In that event, the Selling Shareholder and Holder
shall participate in the sale pro rata, with the Selling Shareholder and
Holder each selling half the total number of such shares to be sold in the
sale. For purposes of this Article 12, a "Qualified Public Offering" shall
be deemed to have occurred if the Company has received net proceeds of
$15,000,000 and its shares are traded on Nasdaq or a United States
securities exchange.
13. Governing Law. This warrant shall be governed by the laws of the
-------------
State of Tennessee applicable to agreements made entirely within the State.
14. Severability. If any provision(s) of this Warrant or the application
------------
thereof to any person or circumstances shall be invalid or unenforceable to any
extent, the remainder of this Warrant and the application of such provisions to
other persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law.
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15. Counterparts. This Warrant may be executed in any number of
------------
counterparts and be different parties to this Warrant in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same Warrant.
16. Jurisdiction and Venue. The Company hereby consents to the
----------------------
jurisdiction of the courts of the State of Tennessee and the United States
District Court for the Middle District of Tennessee, as well as to the
jurisdiction of all courts from which an appeal may be taken from such courts,
for the purpose of any suit, action or other proceeding arising out of any of
its obligations arising under this Agreement or with respect to the transactions
contemplated hereby, and expressly waives any and all objections it may have as
to venue in any such courts.
17. Stock Options. The Company may grant stock options to employees
--------------
representing up to 5% of the common stock of the Company, provided such options
are incentive stock options.
17
IN WITNESS WHEREOF, the parties hereto have set their hands as of the date
first above written.
MEGAMARKETING CORPORATION, a
Georgia corporation
By: /s/ Xxxx X. Xxxxx
---------------------------------
Title: Chairman and President
------------------------------
SIRROM INVESTMENTS, INC. a
Tennessee corporation
By: /s/ Xxx Xxxxxxxxxxx
---------------------------------
Title: Treasurer
------------------------------
The undersigned Shareholders join in the execution of this Warrant for the
purposes of acknowledging and agreeing to be bound by Section 12 hereof.
/s/ Xxxx X. Xxxxx
--------------------------------------
Xxxx X. Xxxxx
/s/ Xxxxxx X. Xxxxxxxxx
--------------------------------------
Xxxxxx X. Xxxxxxxxx
/s/ Xxxx X. Xxxxx
--------------------------------------
Xxxx X. Xxxxx
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